Tuesday, May 16, 2017

Traders are piling into 3 safety trades


Global investors are starting to show signs of worry after President Donald Trump admitted to sharing classified information with Russia.

US stocks ticked to record highs at the open on May 16, but have since fallen into negative territory. As money moves out of stocks, it has moved into three big “risk off” trades.

  1. The Japanese yen 
  2. US Treasurys 
  3. Gold

The basic outline here is that betting on yen appreciation is popular during periods of heightened uncertainty.

US Treasurys, considered the safest place investors can park their money, and gold, which is a traditional “end of the world” trade, are also often bought by investors in times of stress.

The yen is stronger by 0.7% at 113.00 against the dollar. Last week, it hit a 3-month high near 114.28.  A move through 108.13 will have the yen at its strongest level since the week following Donald Trump’s election victory. 


US Treasurys are seeing a modest bid push yields down by about 4 basis points in the belly of the curve. The benchmark 10-year yield is testing support in the 2.30% area after crossing 2.40% just last week. A breakdown of that level puts the April low of 2.17% back in play. 


Gold is higher by 0.6% at $1,238 an ounce. The precious metal would have to top $1,295 to get to levels last seen since the election.Gold

While these moves are still relatively small, they could be a sign the period of low volatility that has gripped markets for most of the year is finally coming to an end.  

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May 16, 2017 at 08:52PM

from Jonathan Garber